In many parts of the country, businesses have the power to choose their energy provider. Energy deregulation in these markets means competition among electricity suppliers, which drives down the energy cost to end users. While the Texas market has unique features compared to the energy supply market in other deregulated states (New Jersey, Ohio, New York, Massachusetts, Pennsylvania, Connecticut, Illinois, Maryland, Delaware, Maine, New Hampshire, Rhode Island, and Virginia), the concept of shopping for electricity suppliers remains consistent.
Thinking about switching electricity providers? Here’s what you need to know.
Utility companies are responsible for maintaining the poles and power lines that transmit electricity, but suppliers/providers are the companies who purchase electricity from generators on the wholesale energy market and then sell that to the end user. Unlike other states where consumers can elect to stay on a default local utility supply, Texas residents and business owners must choose a retail electric provider (REP) since the majority of The Lone Star State experienced energy deregulation in 2002.
For many Texans, switching providers can provide great savings. But “switch” doesn’t just mean moving from a current supplier to a new energy supplier. It can also mean switching to a new plan once a current contract has expired. This way, you always get the best deal. But with so much competition for energy choices, it can be hard to find the best deals.
The best way to stay on top of electricity rates and competitive energy companies is to partner with an advisor like 5 Digital Energy. Navigating electricity and natural gas markets is a full-time job that most business owners don’t have the time or expertise to handle.
Here’s what the team at 5 Digital Energy will help you consider when it’s time to switch energy providers:
We can help you decide the best time to lock in new rates based on market conditions.
The electricity and natural gas markets experience more volatility than virtually any other commodity; energy rates change every hour! The market fluctuates based on supply and demand and is influenced heavily by weather and government regulations.
5 Digital Energy has over 850 years of combined energy experience. Our job is to help our clients navigate these power markets and empower people to make informed energy decisions.
The best way to capitalize on a market opportunity is to partner with an advisor you can trust.
Electric bills are usually a top 3 expense for small businesses; we can help manage risk around this expense by informing you of market opportunities so you can put renewal contracts into place at the most opportune times.
The electricity prices you see online are measured in cents per kilowatt-hour (kWh). You can find your current kWh by looking at the Supply portion of your energy bill. Knowing your energy usage can help narrow down the appropriate rates for your home or business.
There are several types of electricity plans that customers can choose from, including:
- Fixed-rate plans: These plans offer a fixed price per unit of electricity for the entire duration of the contract. The customer’s rate is not affected by changes in the market price of electricity.
- Variable-rate plans: Unlike fixed-rate plans, variable-rate plans offer a fluctuating price per unit of electricity that is based on the current market price. The customer’s rate can change from month to month and is affected by market changes.
- Time-of-use plans: These plans offer different prices for electricity at different times of the day, based on the time of use. The customer’s rate is higher during peak demand periods and lower during off-peak periods.
- Green energy plans: These plans provide electricity that is generated from renewable sources like solar or wind power. They may also utilize incentives like renewable energy credits, or RECs.
When searching online for electricity rates, different websites can show a mix of these different plans without clearly defining the differences between contract terms and budget impacts.
The lowest electric rate does not always equal the lowest electric bill.
There are many components of an electric rate. The reason you see so many different rates online is because the retail electric providers can choose how to represent those rates. For example, if you see an offer that is very low, that may mean that the supplier has elected to pass a certain cost component through to the final invoice instead of lumping it into the rate. In that case, the contracted “rate” may be lower but your overall bill may be the same or higher than others when all the pass-through costs are added up.
We have found that fully fixed rates tend to be the most beneficial for small and medium businesses as it allows energy costs to be more accurately budgeted and managed.
An early termination fee (ETF) is a fee that customers pay when they terminate their retail electricity agreement before the end of the contract term. The fee is intended to compensate the electricity provider for the costs associated with early termination, such as changes in the energy market, lost revenue, administrative costs, and the cost of finding a new customer. For most commercial contracts, the cancellation fee is based on the number of months remaining in the term of the agreement.
Alternatively, some providers may charge a fixed dollar amount for each month remaining in the contract. For example, if the ETF is $50 per month and the contract has 12 months remaining, the ETF would be $600.
It is important for small business owners to review the ETF calculation in the retail electricity agreement before signing the contract, to ensure that they understand the terms and the potential financial impact of early termination.
Importantly, switching to a new provider does not affect the reliability or safety of electricity service, as the transmission and distribution of electricity is still regulated by the Public Utility Commission of Texas (PUCT). That means that a chosen supplier cannot impact whether the lights stay on.
Usually, switching electricity suppliers in Texas can lead to cost savings, lower rates, and better options for consumers. It is important to find an energy advisor you trust who understands the energy market and how this purchase can impact your business. Before renewing with your current provider, understand all of your options, learn how you can benefit by switching energy suppliers, and compare energy prices.
Visit the 5 Digital Energy website or contact us to learn more about your energy options!